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How Could This Happen to Annie Leibovitz?

In 2007, Leibovitz decided to shake up her financial management. Kantor was dispatched and replaced by a man named Kenneth Starr (no relation to the prosecutor), who was something of a celebrity accountant, having managed money for Wesley Snipes, in his pre-tax-protesting days, and Sylvester Stallone. In 2008, with Leibovitz still seeking additional ways to borrow money, Starr told her about a company called Art Capital, founded by a New York entrepreneur named Ian Peck and co-owned by a man named Baird Ryan. The son of a successful art dealer and a wealthy developer, Peck had run a Madison Avenue gallery called Ian Peck Fine Paintings, then during the dot-com boom he established a short-lived website called FineArtLease.com, which sought to lease rather than sell expensive paintings to corporate clients. Formed in 1999, Art Capital would eventually loan money for a short period of time—a year and a half or less, usually—often at a relatively high interest rate, using art and antiques as collateral. For those who have most of their assets in art, particularly gallery owners and art dealers, this constituted a potentially valuable service, since banks are typically reluctant to loan against fine art and antiques because market valuations vary so wildly. Art Capital, however, was willing to make loans of up to 50 percent of the value of the collateral, and since valuations were often done in-house, the loans could be turned around quickly, often within days.

Leibovitz, meanwhile, had fresh money problems. Vendors whom she hadn’t been able to pay began calling in the debts. Zeff Design, the firm doing the Greenwich Village renovation, which had been sending Leibovitz bills for $51,000 for five years, finally sued her in 2008. Traditionally Leibovitz would submit claims to Condé Nast or an advertising client to cover her expenses. The client would then reimburse her, and she would pay her vendors. Now, it appeared, those payments weren’t making it out the door. Brent Langton, a lighting specialist, sued Leibovitz, claiming his company was owed more than $221,000 for rentals in 2006 and 2007. An agency representing Nicoletta Santoro, a clothing stylist, also sued, saying it was owed over $385,000. According to a person familiar with the situation, after Leibovitz failed to pay hundreds of thousands of dollars she owed Box Studios, an elite postproduction company, they insisted on billing Condé Nast directly.

“You’re not afraid of me,” she said. “It’s not fun anymore.”

In June 2007, Leibovitz arranged a meeting with Edwynn Houk and announced she wanted him to start selling her prints aggressively. Houk had been selling her portraits of musicians like Iggy Pop and Johnny Cash for between $4,500 and $5,500 each, but Leibovitz needed to make much more than those prices could generate. Together they decided to create a Master Set—200 of her most iconic images, printed in a massive 40-inch-by-60-inch format, limited to only seven prints each, and sold at $25,000 per print. The total value of the set would come to $35 million.

About a year later, after premiering the first Master Set prints at Paris Photo, Houk got a call from one of Leibovitz’s assistants informing him that, after a decade of working together, she was dropping him as her gallerist. In mid-September 2008, the auction house Phillips de Pury & Company proudly announced that it now represented Leibovitz, and its first order of business would be to premiere 24 images of the Master Set in its London gallery on October 23. The price of each print was now set at $33,000.

When Leibovitz signed on with Phillips de Pury, Phillips management was unaware of a critical fact—one that it first learned about from a February 24 front-page story in the New York Times. Headlined THAT OLD MASTER? IT’S DOWN AT THE PAWNSHOP, the story reported that Leibovitz had taken two loans from Art Capital totaling $15.5 million (the actual figure turned out to be even higher—$24 million). In the same month in which Leibovitz had allowed Phillips de Pury to announce the partnership, it turns out, she had pawned at least some of the rights to her work as loan collateral. In an agreement reached several months later, Art Capital appears to have become the only entity authorized to sell her photos. (Leibovitz has since left Phillips de Pury and returned to James Danziger; presumably Leibovitz and Danziger believe they still have or can regain the sales rights.)

The Art Capital loan effectively consolidated all of Leibovitz’s major outstanding obligations, including her mortgages. The interest rate is unknown, but the term is just one year. That means Leibovitz has to come up with $24 million, plus interest, by this September. Under the terms of the agreement, Art Capital could be entitled to up to 10 percent on the sale of Leibovitz’s real estate and 15 percent on the sale of her work. In the event Leibovitz defaults on the loan, a default commission of 25 percent, and after costs as low as 14 percent, would be realized.*